I don’t like to value miles because the logic behind it doesn’t make sense. However, if I had to value each point, my methodology would be what I can consistently get as an alternative. I ignore specific outliers and scenarios, as well as arbitrary assumptions on how much miles and point are worth.
Valuing a Business Class Ticket to Asia
Take, for example, a 77,500 mile business class ticket on Aeroplan from Los Angeles to Bangkok with minimal taxes.
There are so many numbers that can be thrown around on what each Aeroplan mile is worth. What a lot people do is how much the alternative would cost. For example, a ticket in business class with the exact same routing is $3,116. So for this particular scenario, these points are valued at 4.14 cents.
If you even change the itinerary, the cheapest business class option is Turkish Airlines at $2138, dropping your valuation to 2.75 cents.
The thing is, you’re again using specific data points. You’re ignoring discounts you could get if you used AMEX Travel, or flexible travel rewards, and the miles you’d earn with a paid ticket. Each of them generates a different value you can have with your miles for that particular alternative. Especially with First Class tickets, you can easily manipulate that number to get significantly larger.
On the other hand, you also run into trouble if you start with an unsupported statement to value the points.
Let’s say that the value a Membership Rewards point at 1.8 cents. So, once I transfer to Aeroplan, does that mean this redemption is worth 1.8 cents?
But the valuation of an MR point itself is pretty arbitrary. Most people probably value MR more than Aeroplan, but when you transfer your points, do you suddenly lose whatever margin of value you had?
Now, what I used to do before was calculate the very lowest cost to acquire these miles. For example, if you had timed everything right, you could have bought these points outright for 1.18 cents. First you could have bought SPG points while they were on sale at 35% off. At the 20k transfer increments where you get the most value, each airline mile cost 1.82 cents.
If you stacked that on top of the current 35% bonus Aeroplan is running, each Aeroplan would only cost 1.18 cents.
Additional Reading: Aeroplan 35% Transfer Bonus!
But this is given perfect circumstances – that you bought SPG at a discount, and that you had multiple accounts to exceed the 30k limit, and then transferred at the perfect ratio (which is exactly 40,555 SPG points).
With these past scenarios, an Aeroplan mile could have been worth 1.18, 1.80, 2.75, or 4.14 cents. They can range anywhere between that with any other particular scenario you come up with, like if you used United Miles, or booked a cheap economy ticket. But again, all of that comes down to what you want, which isn’t universal.
There are two scenarios I’d like to point out. For example, I value Avios and Aeroplan at 1.6 cents each. Knowing that American Express Membership Rewards transfers to both, some people put an additional value on the flexibility, and say, value those at 1.8 cents. But I don’t, because I already have Aeroplan and Avios in my accounts.
Next, if you had 77,000 Aeroplan in your account for the 77,500 redemption, the question is how much would you pay for those last 500 miles? Most people would pay a lot, but again, this is a very specific circumstance. For all the years I’ve been enjoying miles and points, I’ve never had that situation come up.
So, my valuation comes down to what I (and you) could consistently get instead of those Aeroplan miles. At the very minimum, you can redeem them for gift cards. That’s around 0.74 cents, but again I don’t value gift cards at face value for cash.
Now, let’s say you have a lot of family and friends going between Hong Kong and Vancouver. if you book their tickets, you get a certain value from your point. The terms and conditions of most programs don’t permit you to sell miles, but even as a gift there’s some value. It’s also a grey area – if they treat you to lunch, is that a barter transaction? Now let’s move along the spectrum. The figure gets more clear – like if a friend trades you Capital One points for grabbing an Aeroplan ticket for him.
But that’s basically my reasoning when it comes to valuing points. I like to ask what you can get consistently for your miles, ignoring specific scenarios. That’s very unspecific as well, but it does again depend on what you are able to do with your miles. If you don’t have lots of family flying between Hong Kong and Vancouver, for instance, that changes things.
Obviously, I don’t recommend that you break the Terms & Conditions of a program. But even then, if you go and sell miles, what happens if someone screws you on the transaction, or the program catches you? You’d have to price that all in when to your valuation. Again, this is all hypothetical, and I don’t take hypotheticals when creating my valuation.
So, everyone will have a different figure on how much miles are worth. My figure is going to differ from yours. Having said that, I don’t deny there I can do many things others can’t. A lot of people thought that my last post on the Best Economy Airport Experience was misleading. I can understand where they’re coming from.
Additional Reading: The Best Economy Class Airport Experience
But when I’m writing, this really is the best economy airport experience I had. I’m not lying. True, nearly all of it was because of my elite status, but that’s not my fault, is it? Nowhere in my post do you can experience this yourself. I’m not going to write “The Best Economy Airport Experience if you have Status.” That’s a lame title.
Finally, even if you had found a value on miles – say Aeroplan at 1.6 cents – it still doesn’t really work. You value it that because it as a return you can consistently get, but you can’t convert them to cash at 1.6 cents nor can you buy them at 1.6. It’s not like instead of the 77,500 mile ticket, you could get $1240, or that you could buy that business class ticket for $1240.
So that’s why I don’t hold myself back from saying that this your miles are worth 5 or 10 cents apiece on good redemptions, because that’s just cost/miles = value. It’s a calculation. Now, the value of points are also just some arbitrary number that you “feel” like the miles are worth. At the end of the day, what matters is that everyone get to enjoy things with miles and points that normally are impossible. 🙂